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Frequently asked questions

Why did Alaskans create the Fund?

During construction of the Trans-Alaska Pipeline in the 1970's, oil companies flooded state coffers with money paid for leases to explore and secure drilling rights.  The Legislature spent all $900 million of that initial lease money within a few years. Alaskans realized that they were about to receive a great deal more money from oil when the pipeline was complete. They wished to better safeguard the robust income forthcoming from the pipeline, but the state constitution did not allow for dedicated funds.  So Alaskans voted in 1976 to amend the constitution to put at least 25% of the oil money into a dedicated fund: the Permanent Fund.  This would save money for future generations, which would no longer have oil as a source of income. In 1976 Governor Hammond proposed a constitutional amendment to create the Fund. The 9th Alaska Legislature modified the governor's legislation and placed it as a ballot proposition in the 1976 General Election.  It passed by a margin of two to one.

What is the purpose of the Permanent Fund?

The 1976 state law establishing the Permanent Fund (AS 37.13), states that the Fund was created:

  • to provide a means of conserving a portion of the state's revenue from mineral resources to benefit all generations of Alaskans
  • to maintain safety of principal while maximizing total return
  • to be a savings device managed to allow maximum use of disposable income for purposes designated by law

How is the Fund invested?

The Board's goal is to earn slightly better-than-average rates of return with slightly below-average levels of risk.  To accomplish this, it adheres to the Prudent Expert Rule to manage a well-diversified portfolio.  The asset allocation includes domestic and foreign stocks, bonds, domestic real estate and REITs, private equity, absolute return and public infrastructure investments.

How big is the Permanent Fund?

The Fund stood at $37.8 billion as of the end of the 2007 fiscal year, on June 30, 2007.  This figure can fluctuate up or down with market movements, but trends upward over time.  Check this site's home page for the Fund's daily updated total market value.   The Alaska Permanent Fund is among the largest investment funds in the world.  In the U.S., the Fund is larger than any endowment fund, private foundation, or union pension trust.

What happens to Fund income?

The Legislature decides how Fund income is used.  To date, the Legislature has:

  • inflation-proofed Fund principal
  • paid dividends to qualified applicants
  • made special appropriations to the principal
  • paid for some Fund-related state expenses

Are some Fund investment classes too risky?

Stocks are the most volatile asset class and are high risk in the short run.  But for long-run investors like the Permanent Fund, there's actually a greater risk to be out of the stock market than to be in it.  The long-term trend of stock prices is more steeply upward than that of other asset classes.  Stocks advance in 6 out of every 10 years, in 72% of all 5-year periods and in 77% of all 10-year periods.  One study looked at the 62-year period from 1926 through 1987.  It showed that if an investor had been out of the stock market only during the 50 best market months (which would be only 7% of the total months in the 744-month time span), total return for the 62 years would have been zero, rather than more than 10% compounded annually had she stayed the duration.  The Fund is now also invested in alternative investments, including private equities, hedge funds and public infrastructure.  Gradual exposure to these classes will be in keeping with how the Fund has started out in stocks...dedicating just a small percentage of the Fund's total value as Trustees gain knowledge and experience investing in a new asset class.

Could there be no dividend in some years?

Yes. The Alaska Constitution states that the Fund's principal cannot be spent.  The dividend can only be paid from Fund earnings. If the earnings reserve is zero or negative on June 30, no money can be paid out.  APFC Trustees are proposing a better method for determining Fund annual payout that would require a change to the constitution through a vote of the people. The Percent of Market Value (POMV) payout method would remove the distinction between principal and earnings, treating the Permanent Fund as one pot of money.  Five percent of the Fund's total market value could be paid out each year.

How's the Fund doing?

The Fund has earned about 10% annualized total rate of return over the long run (10.34% as of March 2007).   This is in excess of it's post-inflation targeted rates of return during this time frame. 

Why is the Fund successful?

  • It keeps a diversified asset allocation.
  • It was created by a Constitutional amendment.
  • The APFC, which manages the Fund, receives legislative oversight.
  • The dividend program keeps the Fund in the public eye.
  • The Fund has sound management practices, including performance oversight of managers.
  • The Fund is not used as an economic development bank.